Commerce ministry mulls 3-yr extension of EoU tax breaks

The commerce ministry has proposed a three-year extension of tax benefits given to Export-oriented Units (EoUs) in an attempt to encourage export industries at a time when global demand is expected to slump further.The move will benefit more than 2,700 companies operating within the EoUs, like the Reliance Industries Ltd’s (RIL’s) 33-million-tonne-per-year petroleum refinery in Jamnagar, Gujarat.Under Section 10(B) of the Income Tax Act, EoUs do not need to pay tax on profits provided they fulfil some conditions, including exporting not less than 50 per cent of their total production. This benefit is to expire at the end of next fiscal 2009-10.“We have taken up the issue of extending the sunset clause by another three years,” said Commerce Minister Kamal Nath at the annual award function of Export Promotion Council for EoUs and Special Economic Zones (EPCES) here today. Sunset clause refers to a law that expires at a specified point of time.Exports by these EoUs stood at Rs 1,54,428 crore in 2007-08, about 24.7 per cent of the total exports (in rupee terms). Chemical and pharmaceutical units account for about 18 per cent of the exports from the EoUs, followed by engineering companies at about 10 per cent.Experts say the proposed extension will enable units in EoUs to plan better. “EoU exports have been increasing at an average rate of 20 per cent in the past 10 years, generating manufacturing activity and employment. Extending the scheme will add clarity to these units’ expansion plans, which will lead to additional manufacturing and exports as well as employment,” said L B Singhal, director general of EPCES.Government sources, however, said a decision on this will probably be finalised only after a new government takes over after the general elections, likely to take place after April.